The High Price of Diamonds Relative to the Price of Water

question 18

Multiple Choice

The high price of diamonds relative to the price of water reflects the fact that,at typical levels of consumption,

• A)the total utility of water is relatively low.
• B)the total utility of diamonds is relatively high.
• C)the marginal utility of water is high.
• D)the marginal utility of diamonds is relatively low.
• E)None of the above is true.

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Definitions:

FIFO Method

An inventory valuation method that assumes the first items purchased or produced are the first ones sold, with inventory thus being valued at the most recent costs.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, measuring them in terms of fully completed units.

FIFO Method

"First In, First Out," an inventory valuation method where goods purchased or produced first are sold or used first.

Equivalent Units

A calculation used in process costing that converts partially completed units into a number of complete units of output, facilitating the assessment of productivity and efficiency.